What Are the Benefits of Joining an Angel Group?
The Boise Angel Alliance was formed in 2004, and since then they have grown a local group of educated Angel Investors, and have have raised and deployed four funds that have been extended into local and regional startups. An angel group is a local affiliate of share owners who provide capital for a business-startup in return for ownership equity or sometimes, convertible debt. Angel groups offer amazing advantages for novice and experienced investors alike. Here are six benefits to joining an angel alliance.
As a member of an Angel Group, investors are often exposed to more deals than what an individual investor may be able to manage independently. (The Telegraph). This is because the members of the group have a variety of social networks and connections. Due to community relations efforts of the group, investors often notice an increase in awareness and deal flow. These connections can allow investor’s access to potential investments that aren’t publicly traded, further diversifying investment experience and portfolio. Entrepreneurs often approach angels in sectors outside of their experience. In an angel group, the probability of an investor understanding the deal is high and this angel will better help the investor interpret the investment opportunity (Hudson).
Access to new, cutting edge ideas
As a member of an angel alliance, investors are constantly being exposed to ideas new in the technology world. When pitches or business ideas are created by aspiring entrepreneurs, investors are given the inside opportunity to learn about upcoming business investments. Furthermore making angel investing a riveting practice of investment.
Investing through a fund allows for portfolio diversification for investors. For the average cost of a single angel investment ($50,000 - $100,000), an angel investor can join a fund and invest in 10 - 20 companies. Given the high risk nature of angel investing, this diversification is beneficial for providing the best chance for returns.
Better financial returns are probable when investing with an angel group. This was expressed in 2007 when the Angel Capital Association conducted a research study stating that angel groups had a return of 2.6X in 3.5 years, which works out to 27 percent IRR (Huang). When an investor is able to gain more profit when being apart of an angel group, they are able to invest in more start-ups and earn more profit from said start ups. Being apart of an angel group allows for better opportunities in return.
Benefiting the Community.
The founder of the Boise Angel Alliance, Mary Andrews, stated that “...mentoring entrepreneurs and giving them the connections they need” is a beneficial part of angel investing. For those who want to contribute to their community in a rewarding way, angel investing is a valid choice. Many investors have a past in entrepreneurship and can often offer coaching or connections to those who have genuine startup ideas. It’s about the mission more so than the financial reward.
Participating in an alliance allows an investor to feel as though they are contributing to their community in a big and rewarding way. As mentioned by Kevin Learned, a founding member of the Boise Angel Alliance, there are three major reasons why someone should join an alliance, “to give back time to the community, support entrepreneurs, and participate in something that is really fun and interesting.”
Variety in Investment
With a diverse number of investors in an angel group there is a greater chance that entrepreneurs can collect enough money to build their ideas, therefore, increasing the odds of a successful investment (Hudson). The more money that is pooled into a start-up, the higher chance the entrepreneur can start the business in a more successful and flourishing way.
When involved in an angel group the investor is able to expand their knowledge of investing. Even experienced investors learn something new when becoming an angel. Investors are constantly challenging and learning from one another, making an angel group a great place to make connections and grow or share investment knowledge.
Joining an angel group allows investors to reap the best possible outcome of their investment. Although there is risk involved with investing, the money available for profit is vast.
The Boise Angel Alliance allows accredited investors to invest in local and regional startups and benefit from the impact made in their local economy. Boise Angels are able to make a difference in their community whilst investing in the next generation of great Idaho companies, further making Idaho a more prosperous place to live. Whether you are looking to diversify your portfolio, make more profit on your investments, or join a powerful network, look into angel investing for a brighter future.
“Angel Investing: What's the Magic Number?” Angel Investing Returns - A Guide to Exits for Angel Investors | Seraf-Investor.com, seraf-investor.com/compass/article/angel-investing-whats-magic-number.
Huang, Laura, and Andy Wu. “Angel Research.” ACA, Angel Capital Association, 2007, www.angelcapitalassociation.org/research/.
Hudson, Marianne. “The Advantages Of Belonging To An Angel Group.” Forbes, Forbes Magazine, 25 June 2015, www.forbes.com/sites/mariannehudson/2015/06/25/the-advantages-of-belonging-to-an-angel-group/#1c0c48a11f8e.
“What Are the Benefits of Angel Investment?” The Telegraph, Telegraph Media Group, 24 Mar. 2016, www.telegraph.co.uk/business/sme-library/smes-questions-answered/angel-investment-advice/.